Tag Archives: 2017 NTE

In the 2017 National Trade Estimate Report on Foreign Trade Barriers (NTE), the U.S. Trade Representative (USTR) highlights significant barriers to U.S. exports. Government procurement policies, such as “buy
national” policies and closed bidding, constitute one of the 10 categories in the Report. This post highlights key procurement barriers for major U.S. trading partners, including the European Union, the BRICS (Brazil, Russia, India, China and South Africa) and Japan, and countries that maintain various buy local policies.

European Union: This year’s NTE repeats the 2016 NTE criticism of the low level of U.S. participation in EU procurement and notes that U.S. firms continue to cite the lack of transparency in the procurement processes in a number of member states, including Bulgaria, the Czech Republic, France, Greece, Hungary, Italy, Lithuania, Romania, Slovakia and Slovenia. USTR also cites specific barriers in several member states, such as the difficulties for non-EU firms to participate in French defense procurement.

Brazil: In Brazil, U.S. firms face significant obstacles to securing government contracts unless they have a substantial in-country presence or there are no qualified Brazilian firms. A number of procurement preferences and restrictions that were cited in the 2016 NTE continue to restrict participation by foreign firms. For example, Brazil favors firms that produce domestically and meet economic stimulus requirements, even if the price of a domestic bid is more than 25% higher than a foreign bid. Brazilian regulations require price preferences from 5% to 25% for certain domestically produced products such as high technology products and pharmaceuticals. The National Petroleum Agency establishes local content requirements for Petrobras, the State-controlled oil company. Unlike in the 2016 NTE, the U.S. did not urge Brazil to join the WTO Government Procurement Agreement (GPA).

Russia: This year’s NTE sets out, as in 2016, U.S. concerns with Russia’s import substitution policies and local content requirements. In addition, it points out that Russia has expanded the medical devices subject to its procurement ban and established a ban on certain food and dairy products. Also, based on 2016 amendments to it national procurement law, Russia created a registry of Russian software and approved a three-year plan to switch government agencies to Russian office software. It has also imposed a general ban on over 100 types of foreign-made radio-electronic products and components. Russia has informed the WTO procurement committee that it plans to initiate negotiations to join the GPA, as it committed to do when it joined the WTO in 2012.

India: India’s procurement system continues to be hampered by the lack of an overarching government procurement policy, with multiple bodies issuing their own procurement rules and procedures, resulting in problems with transparency, accountability competition and efficiency. India also still provides preferences to its micro, small and medium enterprises and state-owned enterprises (SOEs). In addition, in 2016, a new Defense Procurement Procedure increased the offset threshold for defense contracts to 20 billion Indian rupees (approximately $300 million). Finally, India issued a Preferential Market Access notification, which requires government entities to partially meet their needs for electronic products with domestic goods.

China: The 2017 NTE echoes last year’s report in expressing U.S. disappointment with China’s latest offer, submitted in December 2014, in its negotiations to join the GPA. China’s market access offer still “remains far from acceptable” with significant deficiencies in a number of areas, including thresholds, entity and services coverage and exclusions.

South Africa: The 2017 NTE again cites South African government’s aim to source 75% of its procurement locally. It also points to an industrial participation obligation that applies to all government entities and parastatals in purchases of goods or services with a value $10 million or more and requires suppliers to engage in local commercial or industrial activity valued at 30% or more of the value of the imported content of their goods or services. Finally, South Africa continues to use government procurement to empower historically disadvantaged populations through its Broad-Based Black Economic Empowerment strategy.

Japan: The Report calls attention to the fact that Japan’s Ministry of Defense (MOD) is the largest source of demand for the aircraft industry, and has generally preferred defense systems developed and produced in Japan even when better foreign products are available. It draws attention to the Memorandum of Understanding on reciprocal defense procurement, which the MOD signed with the U.S. Department of Defense in 2016; it aims for fair and equitable opportunities for U.S. and Japanese firms to participate in defense procurement.

The 2017 NTE identifies domestic preferences and other buy national policies applied in government procurement in a number of countries, including the following:

Egypt: Applies a preference for domestic bids within 15% of the price of foreign bids and gives small and medium enterprises (SMEs) right to supply 10% of goods and services in every government contract.

Indonesia: Grants special preferences to encourage purchase of domestic goods and services and maximize use of local content in government procurement.

Kenya: Reserves tenders funded exclusively by the government with a value less than approximately $575,000 exclusively for Kenyan firms and goods and at least 30% of government contracts for firms owned by women, youth and persons with disabilities; and requires 20% of procurement contracts tendered at country level to go to country residents and ministries and agencies to purchase at least 40% of supplies locally.

Kuwait: Provides 10% price preference for locally produced goods.

Malaysia: Generally only invites international tenders where domestic goods or services are not available.

Nigeria: Applies local content price preference up to 15% and provides preference for majority Nigerian-owned firms where the price is within 15% of that of a majority foreign-owned company.

Paraguay: Provides preference to locally produced goods, provided their cost does not exceed cost of imported goods by more than 20%.

Philippines: May impose a countertrade requirement of 50% of the value of a contract for imported goods or services over $1 million in value.

Qatar: Requires sourcing of 30% of goods and service from domestic SMEs and 10% price preference for goods with Qatari content.

Saudi Arabia:Requires foreign suppliers to subcontract 30% of any government contract to firms that are majority-owned by Saudi nationals; applies a 10% price preference in favor of local products; and requires 40% offsets ofl foreign companies with a government contract above $107 million.

Thailand: Applies a 7% price preference for domestic goods.

Tunisia: Applies a price preference of up to 10% for Tunisian companies and Tunisian-origin product, provided domestic products are of equal quality with foreign products.

Turkey: Applies price preferences of up to 15% for domestic products; and has not yet implemented authority for civilian ministries to impose offset requirements.

UAE: Sets aside 10% of government procurement for SMEs and applies 10% price preference for Gulf Coordinating Council companies.

Venezuela: Applies 5% price preference for products with over 20% local content, and requires that half of local content be from domestic SMEs.